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Acquisitions and Divestitures | 12 Months Ended
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Dec. 31, 2021
Business Combinations [Abstract] |
Acquisition and Divestitures |
2. | Acquisitions and Divestitures
WPX Merger On January 7, 2021, Devon and WPX completed an all-stock merger of equals. WPX was an oil and gas exploration and production company with assets in the Delaware Basin in Texas and New Mexico and the Williston Basin in North Dakota. On the closing date of the Merger, each share of WPX common stock was automatically converted into the right to receive 0.5165 of a share of Devon common stock. No fractional shares of Devon’s common stock were issued in the Merger, and holders of WPX common stock instead received cash in lieu of fractional shares of Devon common stock, if any. Based on the closing price of Devon’s common stock on January 7, 2021, the total value of Devon common stock issued to holders of WPX common stock as part of this transaction was approximately $5.4 billion. The Merger was structured as a tax-free reorganization for U.S. federal income tax purposes. Purchase Price Allocation The transaction was accounted for using the acquisition method of accounting, with Devon being treated as the accounting acquirer. Under the acquisition method of accounting, the assets and liabilities of WPX and its subsidiaries were recorded at their respective fair values as of the date of completion of the Merger and added to Devon’s. Determining the fair value of the assets and liabilities of WPX requires judgment and certain assumptions to be made, the most significant of these being related to the valuation of WPX’s oil and gas properties. Significant judgments and assumptions include, among other things, estimates of reserve quantities, estimates of future commodity prices, expected development costs, lease operating costs, reserve risk adjustment factors and an estimate of an applicable market participant discount rate that reflects the risk of the underlying cash flow estimates. The inputs and assumptions related to the oil and gas properties were categorized as level 3 in the fair value hierarchy. The following table represents the final allocation of the total purchase price of WPX to the identifiable assets acquired and the liabilities assumed based on the fair values as of the acquisition date.
|  | Final Purchase |
|  | Price Allocation |
Consideration: |  |  |  |
WPX Common Stock outstanding |  |  | 561.2 |
Exchange Ratio |  |  | 0.5165 |
Devon common stock issued |  |  | 289.9 |
Devon closing price on January 7, 2021 |  | $ | 18.57 |
Total common equity consideration |  |  | 5,383 |
Share-based replacement awards |  |  | 49 |
Total consideration |  | $ | 5,432 |
Assets acquired: |  |  |  |
Cash, cash equivalents and restricted cash |  | $ | 344 |
Accounts receivable |  |  | 425 |
Other current assets |  |  | 49 |
Right-of-use assets |  |  | 38 |
Proved oil and gas property and equipment |  |  | 7,017 |
Unproved and properties under development |  |  | 2,362 |
Other property and equipment |  |  | 485 |
Investments |  |  | 400 |
Other long-term assets |  |  | 43 |
Total assets acquired |  | $ | 11,163 |
Liabilities assumed: |  |  |  |
Accounts payable |  | $ | 346 |
Revenue and royalties payable |  |  | 223 |
Other current liabilities |  |  | 454 |
Debt |  |  | 3,562 |
Lease liabilities |  |  | 38 |
Asset retirement obligations |  |  | 94 |
Deferred income taxes |  |  | 249 |
Other long-term liabilities |  |  | 765 |
Total liabilities assumed |  |  | 5,731 |
Net assets acquired |  | $ | 5,432 |
WPX Revenues and Earnings The following table represents WPX’s revenues and earnings included in Devon’s consolidated statements of comprehensive earnings subsequent to the closing date of the Merger.
|  | Year Ended December 31, |
|  | 2021 |
Total revenues |  | $ | 5,734 |
Net earnings |  | $ | 1,382 |
Pro Forma Financial Information Due to the Merger closing on January 7, 2021, all activity in 2021 except for the first six days of January is included in Devon’s consolidated statements of comprehensive earnings for the year ended December 31, 2021. The following unaudited pro forma financial information for the year ended December 31, 2020 is based on our historical consolidated financial statements adjusted to reflect as if the Merger had occurred on January 1, 2020. The information below reflects pro forma adjustments to conform WPX’s historical financial information to Devon’s financial statement presentation. The unaudited pro forma financial information is not necessarily indicative of what would have occurred if the Merger had been completed as of the beginning of the periods presented, nor is it indicative of future results.
|  | Year Ended December 31, |
Continuing operations: |  | 2020 |
Total revenues |  | $ | 7,261 |
Net loss |  | $ | (3,438 | )
Basic net loss per share |  | $ | (5.16 | )
Divestitures – Continuing Operations In the first quarter of 2021, Devon completed the sale of non-core assets in the Rockies for proceeds of $9 million, net of purchase price adjustments, and recognized a $35 million gain related to the sale. Devon received $4 million in contingent earnout payments related to this transaction in the first quarter of 2022 with the potential for up to an additional $4 million in the future. The total estimated proved reserves associated with these divested assets was approximately 3 MMBoe. As of December 31, 2020, the associated assets and liabilities were classified as assets held for sale and included in other current assets and other current liabilities, respectively. In 2019, Devon received proceeds of approximately $390 million and recognized a $48 million net gain on asset dispositions, primarily from sales of non-core assets in the Permian Basin. In aggregate, the total estimated proved reserves associated with these divested assets were approximately 54 MMBoe. Divestitures – Discontinued Operations In the fourth quarter of 2020, Devon completed the sale of its Barnett Shale assets to BKV for proceeds, net of purchase price adjustments, of $490 million. The agreement with BKV provides for contingent earnout payments to Devon with upside participation beginning at a $2.75 Henry Hub natural gas price or a $50 WTI oil price. The contingent payment period commenced on January 1, 2021 and has a term of four years. Devon received $65 million in contingent earnout payments related to this transaction in the first quarter of 2022 and could receive up to an additional $195 million in contingent earnout payments for the remaining performance periods depending on future commodity prices. The valuation of the future contingent earnout payments included within other current assets and other long-term assets in the December 31, 2021 consolidated balance sheet was $65 million and $111 million, respectively. During 2021, Devon recorded a $110 million increase to the fair value within asset dispositions on the consolidated statements of comprehensive earnings related to these payments. These values were derived utilizing a Monte Carlo valuation model and qualify as a level 3 fair value measurement. Additional information can be found in Note 19. In the second quarter of 2019, Devon completed the sale of substantially all of its oil and gas assets and operations in Canada to Canadian Natural Resources Limited for proceeds, net of purchase price adjustments, of $2.6 billion ($3.4 billion Canadian dollars), and recognized a pre-tax gain of $223 million ($425 million, net of tax, primarily due to a significant deferred tax benefit) in 2019. Additional information can be found in Note 19.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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